Competitive research is critical before you start building any software.
You might think it would be great if nobody was building anything like your software…you might be wrong. If nobody has built a competing app, it may mean there is no market for it. You might think it would be great if there are big established players with software like yours and you just want to capture 1% of their market share…you’d be wrong. Stealing market share from established players is extremely hard without addressing some unmet need. What you want is a market that is validated by competitors, but ideally established players that are hard to unseat. You then want to find a market niche where users have needs that are both unmet and painful. This article tells you how to identify whether your software idea fits this model. It tells you how to use competitive research to validate your opportunity before you start designing and building your app.
Find a small focused market that needs your product. A good target niche market is one where you know the people who need your product and if you call to pitch them, they have the problem and will “get” your solution right away. Don’t worry that the market is too small, you can always expand the market later when you have traction and revenues. Instead focus on delivering a 100% solution to their pain. If you have a 100% solution for only 1,000 prospects, you’ll get 1,000 customers. If you have a 10% solution to 1,000,000 prospects, you will get 0 customers because someone will have at least 80% of the solution.
Let’s say you want to offer an app that collects information and calculates how much money a bank should lend to a borrower. A direct competitor offers this same app, one specifically focused on banks calculating loan amounts. Microsoft Excel is an indirect competitor; bankers are using Excel for this purpose and they may be perfectly happy with it. If you only focus on direct competitors, you may miss that a huge percentage of users are already using Excel, which they already have without paying anything, and they may love it. Be sure to ask prospects about both types of competitors by asking prospects how they solve the problem today.
Talking with customers is critical. You can discover a lot by talking with prospects:
a. How do they solve the problem today?
b. Is there a solution, either direct competitor or indirect competitor?
c. Is there pain associated with their current solution? What level of pain?
d. Would your solution solve their pain?
e. How much would they be willing to pay for it?
There are two ways to talk with customers. If you plan to sell directly person-to-person, you need to meet or call people who are prospects and find out whether they need it and will pay for it. If you plan to sell via a website to large numbers of users, you want to test both the product idea and your pitch. The best way to do this is to try to sell it from a website, as if it is complete. If people actually click to buy, you know they want it and the price is right. Get them to the purchase and then inform them that the product will be released in six months. Offer them a good discount if they sign-up to be notified when its ready. Using this approach, you have not only validated the product, pitch, and price, you also have a customer ready to buy in the future.
Research Competitors: Get to know your competition. A great hack is once you find one competitor, you enter that competitor’s name into Google followed by vs. example: “Company X vs.” and Google will provide you a list of competitors. You can also go to G2 to find competitors and get insights on them. When Other valuable tools for researching markets, trends and competitors are the following:
Analyze Competitors: You’ll want to know your competitors’ strengths and weaknesses. Read customer reviews on platforms like Trustpilot, social media, and app stores. Make a list of their strengths and weaknesses. This will tell you what you need in your app to maintain parity (strengths) and win customers (weaknesses). If you want to be more formal about it search for SWOT analysis and analyze your competitors against your app idea for Strengths, Weaknesses, Opportunities and Threats.
You can leverage AI to research your customers’ reviews and identify unmet needs and possibly even the level of pain they incur on customers. However, by the time customers are complaining on review websites and social media, you can assume that the company is working on these deficiencies.
Monitor Competitors: Competitive research is never complete; you need to keep monitoring them using the same tools mentioned above. Don’t become too obsessed with your competition. For example, If you’re targeting a different niche, matching them feature for feature, instead of focusing on what your niche needs, can be counterproductive. Focus on making customers happy, but keep one eye on what your competition is doing.
One way to monitor your competition is to leverage AI to monitor changes to their website, press releases, partnerships, customer wins, news stories and the like. A well-engineered prompt that you save and reuse is a great way to get updates. Here is one I use:
“Read all available material, press releases, website changes, partnership and customer announcements, customer reviews and the like about <company name> and create a summary of all changes and updates to their business in the last month. have they introduced or announced any new products, read customer review sites and see what customer like and dislike about <company name>.”
I also like this one:
“What do users say about <company name> on websites like reddit, quora, trustpilot and other such sites?”
Timing is everything in life. Once you’ve done the work and you’ve decided that there is a real opportunity for your app, get it out into the hands of prospects. Your app doesn’t have to be perfect, it just needs to solve unmet pain points of your target customers better than anything else. Don’t get caught in the “paralysis of analysis”, validate your market and then start building. I highly recommend that use start with a wireframe and show this to a few select users to validate that it will solve their pain, and they will buy it when completed. But don’t get stuck in an endless competitive research loop, get building!
Building, marketing and selling an app will consume a lot of your time and money. You might spend years of your life, and raise and deploy millions of dollars in design, development, marketing and sales. It’s the marketing and sales that get expensive. So do your homework to validate the opportunity, market, and customers you are targeting. Make sure you uniquely address some unmet and painful need. It’s fine if your initial market is small, you can always branch into other markets. Find an unserved market need, fill that need uniquely, and then get building.
Mike Hogan
August 28, 2024
